Essential Factors of Negotiation-Labor Relations

Ever since the Industrial Revolution, the kinds of intervention and cooperation strategies between unions and management varry from one company to the other. In fact, such cooperation may reach extremes where in unions and collective action groups are able to receive completely all the demands that they have indicated to management, and there are also instances where none of the demands are met by management. In such instances, there is a clear winner and line as to what are the strategies that have been made use by either side either party (Olson, 1971).

However, after this most often the case, in many of the real world situations of collective bargaining agreements and collective action demands, it is rarely the case that all demands of such collective action groups — and in contrast of the demand managers of organizations — are met without some kind of cost. Usually, collective bargaining agreements result in certain negotiation strategies where in one side of the argument gives and takes depending on the contract that has been drawn up and agreed upon by the two opposing sides.

One method that such event users is the addressing of situations and drawing up such collective bargaining agreements after the fact. In such cases, occurrences such as strikes, picket lines, and even legal repercussions either in the court of public opinion on the corporate legislative process occur before such agreements and operations are made. These are the cases that are most publicized and which we are most familiar with because they are the times when collective action groups and managers of companies undergo a negotiation process that is included in the public eye (Freeman & Medoff, 1984).

In fact, such cases often result in costs and benefits that are mostly aligned towards union members and collective action groups because the additional factor of having public opinion and public judgment towards management in its decisions. However, it is also pointed out by the logic that such cooperation processes, although they are the most popular, are the ones in which both unions and management had the least confidence in.

Having interventions from outside sources such as public intervention and legislative action — and even sometimes government intervention — significantly affects the incentives of both parties that in many cases neither one is content with the results. On the other hand, there also strategies which make use of union cooperation with management in organizations without the need for an after-the-fact occurrence as strikes, union actions, and the like.

In such cases, union and management relations are given heavy weight and priority especially in cases where unions have not yet reached the saturation point of the various demands that they have indicated to management (Offe & Wiesenthal, 1980). In such cases, management regularly holds meetings with union members and union leaders in order to identify collective action demands and the needs of their workers even before there is a need for collective action to reach the level of strikes and high publicity actions.

Here, such intervention by decision-makers are made by management together with current union leaders in order to strike up agreements between the two parties. Labor economics points out that this is the most efficient scenario especially in a collective bargaining Coase like scenario where principals and agents of both parties are able to interact without a significant level of external intervention such as those that haven’t indicated earlier like any government intervention.

From the point of view of management, however, there also strategies that are implemented by organizations where in collective action agreements and union leaders are powerless in the process of being able to create avenues for demands other than resigning or leaving the company. These methods are usually made by management and proprietors of small and medium enterprises — as well as large corporations — through legal measures and contracts that specify each responsibility and right of each principal and agent in the collective action process.

In these kinds of scenarios, it is rarely the case that collective action groups and union leaders are even able to start collective action organizations because legal hurdles are already integrated into the company’s framework so that collective action agreements already have conclusive outcomes even before unions are able to formulate demands (Dickens, 1986). However, although these organizations rarely suffer the consequences of collective action agreements, it is also interesting to point out that the same organizations survive for long labor environment because inelasticity of demand for your organization significantly decrease.

A reason that has been pointed out by the literature on such subjects at because of the fact that these companies have already experienced previous labor relations and employees as well as a general labor pool already have information about the companies treatment towards human resources, that they in the 1st Pl. are not able to command or create demand for their services.

Also, as a result of not having inputs from employees, such companies are also not able to significantly be a competition to the current labor market because they do not anymore reflect improvements in management benefits through economies of scale because of the fact that labor constantly is not available for the company. From the point of view of management, the biggest challenge for administering a collective bargaining agreement is to be able to resume current work productivity while at the same time not giving up too much overhead and variable costs in the agreements that are created in a management scenario.

Although it may be beneficial for the productivity of the company for management to immediately get into the various demands of union leaders collective action groups, since these demands are usually already adjusted for the fact that management and administration would eventually try to bargain down these demands, it would be too costly for the managers and the company itself even though it would pursue current productivity of labor pool (Ostrom, 2000).

Therefore, a cost-benefit scenario should be taken into mine by the manager of the company for assuming such productivity while at the same time not being too costly to address the needs of workers. In an arbitration process, the steps that are important are the identification of the demands of union leaders and collective action groups.

Since these individuals are usually elected at a relative democratic process at the collective will of employees and human resources, and they are able to stand as representatives for the demands of the organization that they are leaving, being able to identify their various incentives in the arbitration process could be very useful scenario because the final decision eventually falls upon the shoulders of these leaders.

Also, an essential step in the process of collective action arbitration is making sure of a peaceful bargaining process in order to not give the company or organization a negative welfare in fact from the point of view of public opinion and society — which could also be costly if in the case that it provides a negative externality to society and government intervenes in the process.

Finally, although it is often ignored by representatives of companies in the process of arbitration, making sure to maintain an open line of communication between union leaders and collective action leaders with the proprietors and stakeholders of the firm leased to a more efficient arbitration process because the incentives maps of both principals and agents in the current scenario would be met in the middle ground where there is an optimal allocation of meeting both the demands of collective action groups and companies as well.


  1. Dickens, W. (1986). Wages, employment and the threat of collective action by workers.
  2. NBER. Freeman, R. B. , & Medoff, J. L. (1984). What do unions do? Basic Books New York.
  3. Offe, C. , & Wiesenthal, H. (1980). Two logics of collective action: theoretical notes on social class and organizational form. Political power and social theory, 1(1), 67–115.
  4. Olson, M. (1971). The logic of collective action: Public goods and the theory of groups. Harvard Univ
  5. Pr. Ostrom, E. (2000). A behavioral approach to the rational choice theory of collective action. In Polycentric games and institutions: readings from the Workshop in Political Theory and Policy Analysis (p. 472).

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